What Looks Worse – The Fire Damage in Los Angeles or the Economy?

 

What Looks Worse – The Fire Damage in Los Angeles or the Economy?

PETER ON THE WRITERS’ HANGOUT PODCAST!

Estimates for the January fire losses in Pacific Palisades, Malibu and Altadena range from a low of $164 billion to $250 billion or more. Chump change when measured against the damage to the economy from Trump’s ever-vacillating tariff policies. Even excluding the wild gyrations of the stock markets in overseas markets, reacting to Trump’s promised tariffs, our own stock market has plunged by trillions of dollars, sporting the worst share price quarter in two-and-a-half years. “The University of Michigan’s index of consumer sentiment tumbled 10.5% on a monthly basis in March and plunged 27.1% over the past year. The preliminary report released Friday [3/14] shows that consumers’ expectations of annual inflation climbed to 3.9% from 3.5%, the largest monthly jump since 1993.” Associated Press, March 14th. House Democrats have addressed the estimated tariff-related cost increases for average American consumers:

“The costs of specific goods that Americans depend on are expected to rise significantly, including: • Electronics, like computers, phones and televisions, will see overall prices rise by nearly 11%; • Clothing prices are expected to also rise by 7.5%; • The price of cars, car parts, and other motor vehicles are expected to increase by over 6%; • Oil will also rise by 1.7% and petroleum and coal products will rise by 1.6%, making it more expensive for families to fill up their gas tanks and heat their homes; • And at a time when a trip to the grocery store is already squeezing household budgets, grocery prices will jump under these tariffs, with fresh produce prices rising by nearly 3%, rice prices increasing by 4.4% and food prices overall rising by nearly 2%.” The average family net hard dollar increase will range from $2,000 to $10,000 a year.

The March 25th USA Today makes clear what economists have been telling us ever since Donald Trump began touting tariffs as a cure-all for our deficit and to foster reshoring manufacturing: “Just to be clear, tariffs are not paid by countries. They are paid by importing organizations who pay them for the importing businesses they work for. The actual importer then pays the tariff and then determines how much of the tariff cost will be passed on to the consumer. Generally, most of it if not all of it, raising prices.”

For tax jargon fans, this tariff add-on is a de facto sales tax, and such taxes are considered to be “regressive taxes,” since they account for a vastly larger percentage of middle- and lower-income people’s budgets and a vastly lower percentage of income for the rich. This becomes obvious when you understand that the lower your income the larger the percentage of expenditures for basics: food, clothing, shelter and transportation… and those who are richer have lots left over beyond these basics to invest and buy luxury goods. “Progressive taxes” rise as the income levels rise, hence costing higher income Americans a greater percentage as earnings go up. That’s why “progressive income tax rates” increase at various earnings levels.

What makes Donald Trump’s blind faith that tariff revenue will so increase the government’s tax receipts, that our deficit will plunge, is simply that he thinks so. If you look at the projections of commercial banks, central banks in other countries (even our own Fed) and Wall Street – and ignore the projections of Trump appointees who are not allowed to question the boss – there are virtually no numbers supporting either Trump’s revenue tariffs revenue assumptions (by a long shot) and very little evidence that reshoring manufacturing will move the employment needle much. Robotics and our addiction to lower-priced manufactures from overseas suggest almost no real benefits for most Americans.

As noted above, we will face higher prices, which are already rising in anticipation of those tariffs. The date such tariffs went into effect was anything but “Liberation Day,” which is simply a product of MAGA wishful thinking. Credible economists have slowly increased their projection of a possible recession to 40%, a number Trump himself does not dispute. On March 29th, Trump dismissed the reality that foreign car prices would rise saying “I couldn't care less"… but he failed to address the reality that most American cars have substantial parts manufactured overseas.

Instead, Trump has sparked a trade war with what used to be our closest allies… and retaliatory tariffs are expected. International trust in the US dollar and our globally dominating trading and banking exchanges is fading fast. Workarounds are looming.

I’m Peter Dekom, and I would love to see Trump’s undergraduate grades in macro-economics, where he should have learned that Americas greatest period of economic growth and prosperity mirrored the era of free trade!!!